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How to Save More With Lower Fee Bond ETFs

Whether you seek broad index or targeted exposure, bond ETFs offer diversification across numerous bond issues at a lower cost than their mutual fund peers.

US-listed fixed income ETF assets have grown at an annualized rate of about 34% since 2002 to reach $1.29 trillion.1 What’s driving this significant growth? Easy access to market segments where purchasing individual bonds can be prohibitively expensive. Strong liquidity that supports trading flexibility. And, maybe most importantly, lower fund fees.

  • Fees for bond ETFs are 60% lower than their mutual fund peers. Bond ETFs’ median net expense ratio is just 0.28% versus 0.70% for mutual funds.2
  • Active fixed income ETFs’ median net expense ratio is 0.40% versus 0.71% for active mutual fund peers.3

In fact, every SPDR® bond ETF costs less than its mutual fund peer:

  • Fixed income SPDR ETFs have a median expense ratio of just 0.23% versus mutual funds’ 0.70%.4
  • In some instances, our fixed income ETFs are more than 22x less expensive than comparable mutual funds.5

Low-Cost SPDR® Portfolio Fixed Income ETFs

The range of low-cost fixed income SPDR ETFs provides easy exposure to various maturities, credit qualities, sectors, geographies, and currencies — enabling you to easily and cost-efficiently build core bond portfolios.

Build a Low-Cost Core Portfolio

The low-cost core SPDR® Portfolio ETFs™ suite — with over $151 billion in assets — offers:

  • Median expense ratio of just 4 basis points.6
  • 95% lower fees than similar mutual funds.7
  • Median bid-ask spread of just 1 penny.8

Customize the Agg to Optimize Your Core

You can use low-cost SPDR Portfolio fixed income ETFs to rebuild the traditional Bloomberg US Aggregate Bond Index by making tactical overweights and underweights, so that you can optimize for specific yield and duration preferences.

Position Along the Yield Curve with Treasurys

The SPDR® Portfolio low-cost Treasury suite provides cost-efficient exposure to nominal US Treasurys across various maturity bands. These exposures offer you the ability to position along the yield curve to tailor portfolio risk and income characteristics.

Target Corporates Across Segmented Maturity Bands

The SPDR® Portfolio corporate bond suite provides low-cost exposure to broad investment grade corporate bonds across segmented maturity bands. These exposures allow you to position along the corporate credit curve to tailor portfolio risk and income characteristics.

Overweight Mortgages in the Core

The SPDR® Portfolio Mortgage Backed Bond ETF (SPMB) is a low-cost ETF that provides exposure to agency mortgage-backed securities of the US investment grade bond market. Mutual fund competitors cost 15x what SPMB does, as shown below.

Include Non-Core Bond Sectors

Ancillary bond segments, such as emerging market debt or senior loans, can provide potential benefits to investors who find mortgages, Treasurys, and corporates to be too narrow to meet their objectives without overconcentrating the portfolio in any one sector.

To seek income and modulate credit risk across a variety of exposures, you can adjust your allocation with SPDR fixed income ETFs.

Consider Municipal Bonds to Improve Tax Efficiency

SPDR’s municipal bond suite is managed by Nuveen, a leading municipal bond investment manager with 125 years of asset management experience.9 You can use the SPDR municipal bond suite to seek income without overextending on credit risk, while also improving the tax efficiency of your fixed income allocation — all at a lower cost relative to owning single issues or mutual funds.

Pursue Alpha with Active Fixed Income ETFs

SPDR works in partnership with renowned active fixed income managers like DoubleLine, Blackstone Credit, Nuveen, and Loomis Sayles to offer investors access to a range of skilled active portfolio managers. As shown below, in most cases, SPDR’s active core and non-aggregate bond strategies cost less than comparable mutual funds.

Reducing Your Total Cost of Ownership

Of course, it’s important to consider the total cost of ownership (TCO) — the expense ratio plus trading and holding costs — for any investment.

And in addition to reducing operating costs, which lowers your fees, ETFs’ unique creation and redemption process also works to reduce TCO.

  • ETFs’ two trading markets provide increased liquidity to support quick reallocation of portfolios or the ability to meet investor redemptions. 
  • ETFs are tax efficient because they tend to distribute fewer capital gains than mutual funds. In 2022, just 3% of fixed income ETFs distributed capital gains compared to 15% of fixed income mutual funds.10 Taking a broad view, 4% of all ETFs distributed capital gains compared to 44% of mutual funds.11

Invest with a Fixed Income Investing Leader

SPDR bond ETFs are built and powered by the same expertise and resources that have made State Street Global Advisors one of the world’s leading fixed income institutional managers and a pioneer in ETF investing.

Our 26 years of experience managing bonds, and $585 billion in fixed income assets under management,12 should help investors feel confident looking to us for potential investment solutions, including:

  • 100+ fixed income strategies that provide choice and access to previously unreachable asset markets and strategies. 
  • 140+ fixed income professionals across the globe dedicated to conducting research, innovating new fixed income solutions, managing risks and costs, and supporting clients. 
  • A dedicated capital markets team that provides 24-hour coverage across global markets, offering enhanced liquidity and cost-efficient trading strategies.

Against the macro backdrop of elevated market volatility, a more restrictive Federal Reserve, and persistent inflation, we expect strong flows into low-cost, tax-efficient ETFs to continue.

And as the benefits of ETFs are more broadly explored, they should continue to increase in number and variety, creating even more opportunities for today’s investors.

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